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Granite Materials Is Profitable and Nearly Out of Cash

Finance
medium30 min0 submissions
McKinsey
Scenario

Granite Materials is a building materials business in India. Last year it reported ₹237 Cr of revenue, a gross margin of 30%, and a net profit margin of 10% — its third consecutive profitable year.

The CEO is baffled. The company has ₹13 Cr in the bank, has drawn ₹44 Cr of its overdraft facility, and has twice delayed supplier payments this quarter.

Balance sheet metrics:

  • Days sales outstanding: 79 days
  • Days inventory outstanding: 102 days
  • Days payables outstanding: 44 days

Revenue grew 35% last year, and the sales team is targeting similar growth again.

Supporting data

liquidity

cash cr
13
overdraft drawn cr
44

working capital

days sales outstanding
79
days payables outstanding
44
cash conversion cycle days
137
days inventory outstanding
102

income statement

revenue cr
237
net margin pct
10
gross margin pct
30
revenue growth pct
35
Your task

Explain to the CEO what is happening and what to do about it. Provide:

  1. Analysis — why a profitable company is short of cash.
  2. Risks — what happens if nothing changes.
  3. Recommendation — the specific actions you would take, in priority order.
Ready to move forward? Up next: Verity Insurance Is Profitable and Nearly Out of CashNext question
How you'll be graded

100 points, 60% to pass.

  • diagnosis30
  • recommendation25
  • risk assessment15
  • financial analysis30
Hint
Reveal suggested structure
  1. Cash conversion cycle = DSO + DIO − DPO = 79 + 102 − 44 = 137 days.
  2. Cash tied up ≈ (CCC ÷ 365) × revenue.
  3. Growth makes it worse — every extra unit of revenue funds more receivables and inventory before it produces cash.
  4. Levers, in order of speed: collections, inventory, payment terms.
  5. Quantify the cash released by improving each lever.